Rising oil prices boost inflation expectations, suppress safe-haven demand, and gold remains within a range of fluctuations.

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Source: Huitong Finance

In the Asian session on Monday, gold prices are under clear pressure, with XAU/USD falling by more than 1% immediately at the open, touching a low near 4445 dollars and extending the corrective trend from earlier. In sharp contrast, crude oil prices have continued to strengthen; WTI crude oil is up by about 3% in the opening phase, moving above 102.50 dollars, indicating that the energy market is once again pricing in supply risks stemming from the escalation of the conflict in the Middle East. This “oil strong, gold weak” combination reflects that market trading logic is shifting from pure safe-haven demand to being driven by inflation and interest-rate expectations.

From the event perspective, the Middle East situation remains the key driver of the current market. Expectations that the U.S. is considering taking further military action against Iran continue to build; according to market surveys, the U.S. Department of Defense plans to deploy about 10,000 additional soldiers to the Middle East region, a move that significantly heightens concerns about spillover from the conflict. At the same time, Iran has issued tough statements, further escalating geopolitical risk. However, on the other hand, the U.S. has also released signals of de-escalation; according to market surveys, the U.S. President said that indirect negotiations with Iran are progressing and believes that an agreement could be reached in the short term. This “conflict escalation and negotiation expectations coexist” setup has led to a clear split in market sentiment.

From the market reaction standpoint, the key factor suppressing gold is the rise in inflation expectations driven by higher oil prices. In theory, when inflation expectations rise, major central banks are more inclined to maintain high interest rates or even further tighten monetary policy, thereby increasing the opportunity cost of holding non-yielding assets. Gold, as a typical non-yielding asset, clearly loses appeal in a high-interest-rate environment. Therefore, although geopolitical risk is usually supportive for gold, the market is currently focusing more on the transmission path of “higher oil prices → higher inflation → higher interest rates,” which in turn leads to gold declining instead.

From the perspective of global market impact, rising energy prices are reshaping the macro trading framework. On one hand, higher inflation expectations could delay the rate-cutting pace of major economies, putting pressure on the bond market; on the other hand, the U.S. dollar remains relatively strong under safe-haven and interest-rate differential logic, exerting additional pressure on gold. In addition, correlations among commodities have strengthened; the rise in crude oil is creating a “crowding-out effect” on the metals market, with more capital flowing into the energy sector rather than precious metals.

From the angle of market sentiment, the current drop in gold is not driven by a single factor, but rather the result of multiple logics overlapping. On one hand, geopolitical risk provides a floor that limits how deeply gold prices can correct. On the other hand, inflation and interest-rate expectations dominate the near-term direction, causing the price focus to keep shifting downward. At present, investors are concentrating on two areas: first, whether the situation in the Middle East will further escalate; second, whether major central banks will adjust their policy paths due to inflation pressure.

From a technical perspective, at the daily level, gold prices have fallen below a key structural range, forming a clear downtrend. Since the peak around 5300 dollars, there have been consecutive lower closes, indicating that the bears dominate the market. The current price action is running below the 20-day exponential moving average; this moving average near 4735 dollars forms a dynamic resistance. The overhead resistance zone is concentrated at 4736-4915 dollars; if it cannot be broken through effectively, this zone will continue to suppress rebound room. In terms of momentum indicators, the 14-day Relative Strength Index remains in the 20-40 range, suggesting that the market is still in a weak zone but has not entered an extreme oversold state. On the 4-hour cycle, prices show a choppy downward pattern with limited rebound momentum. If the rebound is capped near 4735 dollars, the downtrend could continue. The initial support below is at 4307 dollars; if that level is broken, price may further point to the 4100-dollar area. Overall, as long as key resistance ranges are not broken, short-term bearish pressure still holds the upper hand.

Editor’s Summary

The current gold market is in a tug-of-war between “geopolitical support” and “interest-rate pressure.” Although the Middle East conflict provides some downside support for gold prices, rising oil prices are lifting inflation expectations, causing the market to reprice the higher interest-rate environment, which in turn weakens gold’s appeal. In the short term, gold may still maintain a choppy and downward pattern; unless geopolitical risk escalates beyond expectations or monetary policy expectations shift significantly, the room for a gold rebound is limited. Going forward, it will be important to focus on changes in inflation data and central bank policy signals, as these will determine the direction of gold’s medium-term trend.

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责任编辑：Zhu Hunan